Tigo Energy, Inc.

Good afternoon. Welcome to Tygo Energy's Fiscal First Quarter 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. Joining us today are Svi Alon, CEO, and Bill Roschlein, CFO. As a reminder, this call is being recorded. I would now like to turn the call over to Bill Roschlein, Chief Financial Officer.

Thank you, Corinne, and it's a pleasure to join you from our corporate offices in Campbell, California. Also with us is Viallon, our CEO, who is joining us from the Intersolar Conference in Munich, Germany. I'd like to remind everyone that some of the matters we'll discuss on this call, including our expected business outlook, our ability to increase our revenues and become profitable, and our overall long-term growth prospects, expectations regarding recovery in our industry, including the timing thereof, Statements about demand for our products, our competitive position, and market share. The impact of tariffs, our current and future inventory levels, charges, reserves, and their impact on future financial results. Inventory supply and its impact on our customer shipments. Statements about our revenue and adjusted EBITDA for the second quarter of 2025 and our revenue for the full year of fiscal year 2025. Our ability to penetrate new markets and expand our market share, including expansion in international markets. Investments in our product portfolio are forward-looking. and as such are subject to known and unknown risks and uncertainties, including but not limited to those factors that are described in today's press release and discussed in the risk factors section of our most recent annual report on Form 10-K. Our quarterly report on Form 10-Q for the fiscal quarter ended March 31st, 2025, and other reports we may file with the SEC from time to time. These risks and uncertainties could cause actual results to differ materially from those expressed on this call. These forward-looking statements are made only as of the date made. During our call today, we will reference certain non-GAAP financial measures. We include non-GAAP to GAAP reconciliations in our press release furnished as an exhibit to our Form 8K. The non-GAAP financial measures provided should not be considered as a substitute for or superior to the measures of financial performance prepared in accordance with GAAP. Finally, I would like to remind everybody that this conference call is being webcast, and a recording will be made available for replay on Tygo's investor relations website at investors.tygoenergy.com. With that, I'd like to now turn the call over to Tygo CEO, Vialan. V?

Thank you, Vialan. To begin today's discussion, I will highlight key areas in our recent financial and operational performance and briefly address the current macroeconomics development before turning the call over to our CFO, Bill Roschlein. He will discuss our financial results for the first quarter in more depth, as well as provide our guidance for the second quarter and the full year of 2025. After that, I will share some closing remarks, tell you about our outlook, and then open the call for questions from you and the analysts. I am pleased to report that we ended the first quarter of 2025 with our fifth increase in sequential quarterly revenue growth, growing 9.1 percent sequentially and 92.2 percent on a year-over-year basis. In the first quarter of 2025, we reported a total revenue of $18.8 million and shipped 502,000 of 351 megawatts of MLPE. I am exceptionally proud of what our team here at Tygo has accomplished. To give some geographical color on our results, we saw positive sequential sales growth in EMEA, the Americas, and APAC regions. Within EMEA, the EMEA region, the recovery that began for us as a year ago has now broadened as we saw much stronger results from Italy and the Netherlands. In addition to both, the Americas and Asia Pacific regions also grew sequentially in the first quarter. I'm also excited about our recently introduced 22-amp TS4A series, now serving panels up to 725 watts, and joining the TS4X family with the highest safety solution, including the unique TIGO multi-factor rapid shutdown, demonstrating our commitment to stay ahead of the module performance scales. Given the current developments in Washington, many of you are likely interested in how the latest reciprocal tariff decisions may impact us. As you may know, the majority of Tiger's revenue occur outside of the United States. Based on the current reciprocal tariffs announced, we estimated that approximately 5% of our Q1 revenue would have been affected by the China reciprocal tariffs of 145%. We also estimate that approximately 15% of our Q1 revenue would have been affected by 10% of the rest of the world's reciprocal tariffs. We are currently working with our supply chain partners to mitigate the effects of these reciprocal tariffs where possible. And with that, I will turn it over to Bill.

Bill? Thank you, Zvi. Turning now to our financial results for the first quarter ended March 31, 2025. Revenue for the first quarter of 2025 increased 92.2% to $18.8 million from $9.8 million in the prior year period. On a sequential basis, revenues increased 9.1% with improved results coming from many countries in the EMEA and APAC regions. including Italy, Chechya, the Netherlands, and the Philippines. By region, EMEA revenue was $11.5 million or 61.3% of total revenues. America's revenue was $4.7 million or and APAC revenue was $2.6 million or 13.6% of total revenues. By product family, for the first quarter of 2025, MLPE revenue represented $16 million of revenue, or 84.8% of total revenues. GOESS represented $2 million, or 10.7% of total revenues. And PredictPlus and licensing revenue represented $0.8 million, or 4.5% of total revenues during the quarter. Gross profit in the first quarter of 2025 was $7.2 million, or 38.1% of revenue, compared to a gross profit of $2.8 million, or 28.2% of revenue in the comparable year-ago period. Operating expenses for the first quarter declined 5.9% to $11.2 million, compared to $11.9 million in the prior year period. The decline was driven primarily by our previously announced cost-cutting efforts. Operating loss for the first quarter decreased by 56.2% to 4 million compared to 9.1 million in the prior year period. Gap net loss for the first quarter was 7 million compared to a net loss of 11.5 million in the prior year period. Adjusted EBITDA loss in the first quarter decreased 67.4% to 2 million compared to an adjusted EBITDA loss of 6.3 million in the prior year period. These results reflect progress towards profitability on a non-GAAP basis as previously announced. As a reminder, adjusted EBITDA loss is a non-GAAP measure that represents net loss as adjusted for interest and other expenses, income tax expense, depreciation, amortization, stock-based compensation, and M&A transaction expenses. Primary shares outstanding were $61.9 million for the first quarter of 2025. Turning now to the balance sheet, accounts receivable net increased this quarter to $10.4 million compared to $8 million last quarter and increased from $6.3 million in the year-ago comparable period. Inventories net decreased by $3.1 million or 14.1% to $18.9 million compared to $22 million last quarter and $55.8 million in the year-ago comparable period. Cash, cash equivalents, and short and long-term marketable securities totaled $20.3 million at March 31st, 2025. On a sequential basis, cash increased by $0.4 million as we continue to make progress on reducing our inventory and working capital. Turning now to our financial outlook for the second quarter of 2025 and full year of 2025. As a reminder, Tygo provides quarterly guidance for revenue as well as adjusted EBITDA as we believe these metrics to be key indicators for the overall performance of our business. For the second quarter of 2025, we expect revenues and adjusted EBITDA to be in the following range. We expect revenues in the second quarter ended June 30, 2025 to range between $21 and $23 million. We expect adjusted EBITDA to range between negative $1.5 million and positive $500,000. For the full year of 2025, we are reiterating our previous guidance of revenues of between $85 and $100 million. That completes my summary, and I'd like to now turn the call back over to Zvi for final remarks.

We look ahead. I'm happy to say that even against the backdrop of the economic uncertainty, we believe it's our track record of five consecutive quarters with top-line growth will continue for the remainder of 2025 as demand for our solutions continue to return. We firmly believe in the growth prospects for our business and look forward to providing additional updates in the coming quarters. With that, operator, please open the call for Q&A.

Thank you. At this time, we would like to conduct the question-and-answer session. To ask a question, you will need to press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. Please stand by while we compile the Q&A roster. Craig Stein of Craig Howland Capital Group, your line is now open.

Hi, V. Hi, Bill. Hey, Eric. Hello. So curious, I mean, obviously a nice recovery you're seeing in actually across all your markets. But when you think about this, I mean, how do you break this down between just improving conditions with your current distributors and direct sales versus market share gains? Because clearly this is a little bit of both. Would love your thoughts on how that breaks down between the two.

Outstanding question, Eric. Thanks for asking it. I will share that we continue to see current existing distributors, which are very strong, increasing their footprint with us and becoming much more bullish on the market requirements. Similarly, our efforts with going directly to at least promoting the products with system integrators, and large EPCs is paying very nice dividends. And I can tell you that the majority, I would say, of our growth is coming from an increased market share, we believe, even though it's the same exact distributors, and that's what we hear from them. At least I would not mention any names, but two or three of them mentioned specifically that we have increased the footprint within their portfolio substantially above any other competitor.

That's good color. I mean, do you attribute that to just a broader product offering, the fact that this can be used residential, C&I, utility scale? You know, is it price? Is it kind of all of the above?

So I can tell you that I'll touch the price first. We have not changed price at all, and we have been consistent on that front. We introduced the TS4X family at a higher price, and we see a nice increase for those products for a different market, which is accepting it so far. But as far as the TS4A product, price was not an issue. Now, I can tell you that Many factors are helping us gain market share. One, the number of SKUs is very small. We have a single optimizer that covers basically the whole market. Not only that, it's the highest powered rating, which is the current shipping version is 700 watts or 800 watts, and we just announced the 725 watts, and working for essentially all three market segments. Number three, I would say, I believe we are the only company with a backward compatibility of the current shipping products to products we shipped seven, eight, nine years ago, exactly identical. If you have any failure with an old product, which they sometimes do happen, you don't need to go and get the same exact part number. You can just buy any one off the shelf and replace it or get an RMA from us and you'll get a new product to replace it. Also, the fact that our product works with pretty much any inverter out there is also a major contributor. So all in all, oh, I would mention one more thing. Our installation time of the MLP product is superb. It's about 10 seconds per PV module. It's unheard of. I mean, literally, just slide the unit on the panel, connect the wires, and you're done. So all those factors together the more people get to experience, the more they buy into it and want to do more. And I can tell you that the amazing part for us also is that we see larger number of units being shipped to large EPCs, installers, as they become much more aware and successful with those products.

Got it. Thank you very much for that. And then I guess for my last question, then I'll turn it over. Just curious, I mean, OPEX came down a little bit here in the quarter, but I also know that in Q1 you were expecting some audit fees and some other one-time items. So just curious, I mean, your guidance and the fact that at the upper end positive adjusted EBITDA would imply – that OPEX, we should think of it lower. So just curious if you can give any color on that.

So in general, there's two levers to think about in the guidance and projections for the year as you build out your model. We are tracking at a high gross margin. We're seeing that both in our MLP business as well as the lack of having a drag on the margin from our GOESS product line, which we did a large reserve for last quarter. So combining the combination of both should lead to some gross margin uplift as we look later into the year, so 38 plus. I would put it more closer to 40. And OPEX would, you know, conservatively speaking, between 11 and 12, or maybe mid-point 11 and a half is, I think, the fair range. You know, we were 11.2 last Q1, but we were also 11.5 in Q4. So there's a little bit of variability there. But when you model that out, you'll come up with numbers for the adjusted EBITDA that are in the range that we got into. Okay. All right, thank you very much.

Thank you.

Thank you. Our next question comes from Philip . Your line is now open.

Phil?

One moment for our next question. Our next question comes to us from Samir Joshi of HC Wainwright. Your line is now open.

Hey, good afternoon. Thanks for taking my questions and congrats on a good quarter. Thank you. I think in your prepared remark, you mentioned 5% of revenues would have been impacted by 145% tariff and 15% by 10% tariff. The back of the envelope suggests this would be around $1.8 to $2 million. Should we expect that level of impact going forward? And then how does that mesh with the sort of increased gross margin that you have seen recently?

So I would characterize it this way. The U.S. represented about 22% of our revenues. And within that, you've got 15% of that that is our MLPE products that are made outside of China and Thailand. that are subject to the reciprocal tariffs. And we'll see what happens after the 90-day review. And then that leaves 5% that's subject to the China tariffs. But that includes both inverter and batteries. And we are working on our supply chain and have the opportunity to move some of that specifically in the inverter side outside of China. So that would negate much of that 5%. And then the rest of it is batteries, which are sourced in China, but we have a large inventory position in the U.S. already. And so that also negates the tariffs on that. So combining all of that, we don't see a substantial impact. of the tariffs on our business, at least for the second quarter, and we're gonna leave it quarter to quarter because the world seems to change so fast on this front.

Yeah, no, you answered my part two of the question, which was inventory, how much of it will support the second quarter. So it seems you have enough inventory that is pre-tariff that can support your business in the second quarter. Correct. And then the April 24th off-grid product offering that you are, the solar package that you're offering, is there, like where is this demand for off-grid that you're seeing from? Like is it mainly businesses or, because you, the press release also mentions residential and so just was curious, how large is that demand and from where are you seeing that demand?

There is a substantial region, actually a couple, who like to be off-grid, and they are in the Midwest and some South. And that's what we were aiming at. And we started seeing some fairly good success, so we have packaged that solution for that one specific market. If you check who else are providing solutions which are also off-grid, it is becoming an increased number of suppliers. So we are sure we are not going to stay the only one, and we are not right now. But for us, it's a growing segment that we've not touched before.

Understood. And then just the last one. the second quarter guidance implies that your second half revenues are likely to be uh 46 to 59 million just like this by at the midpoint of uh uh 2q guidance uh do you have visibility and how much confidence do you have in that outlook of a strong second half i can tell you that um

We don't have specific orders going out more than a couple of quarters, maybe in some very small cases a little bit more, but the majority are really for the current quarter and the next quarter. But on the other hand, we know how, and we do talk to our distributors, and we know how the markets behave and what their expectations are. And so we factor it in in addition to, obviously, what we know about the market, and we have been so far accurate for the last five, six quarters with our projections. So we are fairly confident. I can tell you that our backlog increasingly, we don't share quite those numbers, but increasingly over the last two or three quarters grew from one quarter to the other. And as we got into the current quarter, we felt much more confident on even increasing the numbers. the guidance.

Understood. That sounds good. Thanks a lot for taking my questions.

Most welcome.

Thank you. As a reminder, to ask a question, please press star 1 1 on your telephone. Our next question comes from Philip Shen of Roth Capital Partners. Your line is now open.

Hey, guys. Thanks for taking my questions. We went through the 10-Q quickly. We saw that there's the going concern language. You have the $50 million convert, I think, due January 1 or sometime in January of 2026. Can you talk to us about the situation there? How do you expect to manage the $50 million due? How flexible would you expect your convert counterparty L1 Energy to be. Thanks.

Yeah, the counterparty is being very flexible and cooperative and is a big supporter of Tygo. And that being said, we are working on a refinance. And I'm sure you can appreciate when we have something announced, we'll announce it. But rest assured, we are diligently working to address the maturity on that.

Okay. Thanks, Bill. From a cash standpoint, you guys have an annual guide. And so if you hit the midpoint of that guide, how much free cash flow generation do you think you can have?

So, you know, on a go-forward basis, we're looking at EBITDA positive. If not in Q2's guide, then for 3 and 4, we would expect that based on the annual guide. The overall cash position is, I would say, probably going to be flattish to slightly up. We are in a replenishment mode on some of the inventory, especially on MLPE. And so there's going to be some consumption there that some of the cash flow generation is going to be used for working capital for that purpose. So we're thinking of cash sort of in a bit range bound in this lower 20s level.

Okay, great. Thanks. And then as it relates to Europe, InterSolar is about to kick off, I think, tomorrow. Are you guys there? I know Europe is a big part of your business, and so what are you hoping to accomplish, you think, at that show?

Thanks. We are at full swing. We have our team ready. We have a very nice booth set, and we actually have a very interesting and busy schedule already from partners, distributors, as well as customers. And it's interesting, but we're all pretty much booked. We didn't have much left to allocate. So we're very happy with what's going on right now.

Thanks, V. And then in terms of distributors, I've been hearing that some of the pan-European larger distributors might be having issues with a trend where more of the local distributors are developing a greater influence with the installer base. Are you seeing something similar? And so, you know, how might you adjust your strategy to sell into Europe? I don't know if this plays a factor at all, but what are your thoughts on this dynamic? Thanks.

So we have seen two phenomena. First of all, big picture, the total number of distributors we have did not shrink much, even with all those guys that went out of business. We actually replenished some of them fairly quickly with others, and some came back from almost extinction. So we were very happy for them to be able to actually survive. Now, to the question itself, we do see a phenomenon in which the very large distributors are starting to sell to some local distribution, And so we have seen that happening in a few places. We are not necessarily encouraging it or discouraging it, but it helps us keep a footprint which is much wider. And for the smaller original ones, they don't necessarily are able to hit the same discount level as the large ones. So that mechanism we have in place, which we are rigidly following, is working for us, and it serves pretty much all of them. And so we don't think we need to make any changes right now. Yeah.

Got it. And so when you see the large distributors selling products to the smaller ones or local ones, what kind of products are we talking about? Modules, inverters, MLP, your products, or is it more focused on storage or some other... category?

No, the majority we see is in the line of inverters, MLPE, and some PV modules. On the battery side and ESS, not much. Not much at all, I would say.

Got it. Thanks, Sadiq. You're most welcome. In terms of maybe the last one here for me, the China tariff in the U.S., 145%. The biggest impact I see is on cell packs for batteries coming into the country and wanted to just check in. Maybe you already addressed this. Sorry if I missed this. But what's the impact for you guys? Do you already have a lot of inventory in country in the U.S. so that that's less of an issue? Or... If it is a bit of an issue, what are you guys doing to mitigate them?

Okay. So for the foreseeable future, I would say the next few quarters, we're in good shape with the inventory we have. And we are getting ready for the next generation, which is addressing the sources of the suppliers. And so we would not be exposed to China as much. But as you know, China controls a very large part in the market. And so I'm not sure we can avoid it completely, but we have other sources.

Good. So for now, you guys have some installation, maybe a few quarters. That's a fair amount of time. But as you burn through that inventory, you do need to start now or soon in diversifying your cell pack geographic sourcing. And so the world is trying to do this release most of the US and so what countries are you trying to go to? Is it Korea? Is it Japan? What are the countries?

It's those two that you mentioned exactly. And also, yeah, it seems like also, some of the Chinese guys are also actually also looking for other sales from other places. So We don't know exactly how it's going to all work out, but Korea and Japan are the two main areas for us.

Okay, great. Best of luck in that transition and with the rest of the year. Thank you, and I'll pass it on.

Thank you much. Thanks, Phil. Are you in Germany?

Not this time around, given the earnings season.

Okay, no problem.

Sorry to miss you. Thanks.

Sorry.

One moment for our next question. Our next question passes in a Cydonian company. Your line is now open.

Congratulations on the quarter, gentlemen. Thank you. Just turning to the demand side, you've reported increased sequential growth in all regions, but just working out some arithmetic, it looked like EMEA was a little bit stronger in growth. Is that accurate?

Yes, we had most growth from APAC region in the quarter, but they represent the smallest of the three regions for us, followed by EMEA and then Americas.

Can you release any growth figures for the Americas?

It's growing a little bit more than what the market estimates are. I mean, it's certainly... Low to mid single digits, I mean, if that helps. It's certainly not the, you know, we did 9%. It certainly didn't carry the day for the 9%.

Got it.

All right.

Well, thank you for the information, and good luck in the coming quarter. Thank you so much. Thank you so much.

Thank you. At this time, this concludes our question and answer session. I'd now like to turn the call back over to Mr. Alon for his closing remarks.

Thanks again, everyone, for joining us today. I especially want to thank our dedicated employees for their ongoing contribution, as well as our customers and partners for their continued hard work. I also want to thank our investors for their continued support. Operator,

Thank you. Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.